This decision was not taken lightly and came after a very thorough review process involving all of the Group's three woollen yarn spinning plants.
In April, Cavalier Corporation signalled that its earnings for the current financial year would be affected by one-off restructuring costs as it repositioned the broadloom carpet business to cope with the difficult operating environment. While the Company indicated at the time that the impact of the restructuring was difficult to project because of uncertainties as to timing, it still believes that if the estimated cost of all contemplated initiatives was taken into the current year, it would have the effect of reducing underlying earnings of between $3-5 million after tax to a loss of $1-3 million after tax.
The closure of the NEC spinning plant will result in a significant reduction in operating costs for the broadloom carpet business and is an integral part of the comprehensive business improvement program aimed at delivering $10-12 million profit after tax in the 2012-13 year.
Eight staff from the yarn spinning plant will transfer into NEC's tufting plant and it is hoped that at least a dozen of the NEC spinning staff will relocate to other plants within the Group, limiting redundancies to around 70 staff. Some staff will be retained to de-commission and reinstall some of the existing NEC equipment at the Group's other plants. All staff will be given every assistance to find other employment including job support outplacement and retraining allowances.
Staff have been advised of their redundancy entitlements and the plant will stop making yarn before the end of July.
The Board stressed that the NEC carpet business and the Norman Ellison Carpets brand itself would not be affected by the move.
This decision is about reducing over-capacity in the yarn spinning operations that support the Group's broadloom carpet manufacturing operations. NEC will continue to make carpet at its Onehunga tufting plant, supported by very capable manufacturing and sales teams.
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